THE INSTITUTE OF FINANCE MANAGEMENT

FACULTY OF INSURANCE AND SOCIAL PROTECTION.

PROGRAMME NAME: BACHELOR OF INSURANCE RISK MANAGEMENT.

MODULE NAME: UNDERWRITING MANAGEMENT

MODULE CODE: IRU-07412

GROUP ASSIGNMENT.

ACADEMIC YEAR: 2022/2023.

STREAM: PT

PARTICIPANTS.

NO. NAMES. REG. NUMBER.

1 ABDALAH S ALLY IMC/BIRM/2124503
2 HOSIANA B SHUMA IMC/BIRM/2114782
3 YAKUBU SEIF IMC/BIRM/2125011
4 ELIAS MAPHINA IMC/BIRM/2125085
5 LYDIA A SHIRIMA IMC/BIR/2022027
6 NELSON W. MACHUMU IMC/BIRM/2126594
7 MWAJUMA Y MSUMARI IMC/BIRM/2112238
QUESTION Underwriter is a person who, at his technical capacity will guide the underwriter
results to guarantee shareholders return on investment. The job is never being a data entry point
rather skilful one. You are not hire as an underwriter in the property portfolio where you promised
to deliver the promising results to your employer. One of the challenges is how you will be able to
meet shareholders returns on investment while safeguards the solvency margin of the company.
As the norms suggest you should be able to balance the service rendered with the quality of risk
taken. Required:

a. Describe what the underwriter will do to improve the long-term standing of the company by
considering job descriptions?

b. Consider key features for the risk which contributes to prosperity of above-described scenario

INTRODUCTION

Underwriting in insurance refers to the process of assessing and evaluating risks associated with
insuring individuals, businesses, or assets. It plays a crucial role in the success of an insurance
company by helping to maintain profitability, manage risk, and ensure the long-term sustainability
of the business. Underwriting can also be defined as “A financial professional that evaluates the
risks of insuring a particular person or asset and uses that information to set premium pricing for
insurance policies. Insurance underwriters are employed by insurance companies to help price life
insurance, health insurance, property/casualty insurance and homeowners insurance, among
others. Underwriters use computer programs and actuarial data to determine the likelihood and
magnitude of a payout over the life of the policy. Higher- risk individuals and assets will have to
pay more in premiums to receive the same level of protection as a (perceived) lower-risk person
or asset”.

Citation “Kaithar, Haryana, Niilm university book on fundamentals of Underwriting and claim,
(2016)”

As an underwriter of a certain insurance company you can deriver some key contributions to the
success of an insurance company which are such as.
Risk Assessment: Underwriting involves analyzing various factors to determine the potential risks
associated with an insurance policy. This includes evaluating the applicant's demographics,
medical history, lifestyle choices, and other relevant information. By accurately assessing risks,
underwriters can price the policies appropriately, ensuring that premiums cover potential claims
and expenses.

Pricing and Premium Determination: Underwriters use their expertise and analysis to set premiums
for insurance policies. They consider the probability and severity of potential claims, along with
factors such as age, occupation, location, and coverage limits. Proper pricing is crucial to ensure
that the insurance company collects sufficient premiums to cover potential losses while remaining
competitive in the market.

Portfolio Management: Underwriters play a vital role in managing the overall insurance portfolio
of the company. They evaluate the distribution of risks within the portfolio, monitor changes in
risk exposure, and make adjustments as necessary. By maintaining a well-balanced and diversified
portfolio, underwriters help mitigate the impact of potential losses and stabilize the company's
financial position.

Profitability and Financial Stability: Effective underwriting directly impacts the profitability and
financial stability of an insurance company. Underwriters aim to strike a balance between
providing coverage to customers and minimizing the likelihood and cost of claims. Through
careful risk assessment and premium determination, they help ensure that the company generates
sufficient income to cover claims, operating expenses, and earn a profit.

Also to be able to balance the service rendered and to with a quality of risk taken underwriting can
be described as the work of ctitical thinking. Underwriting can be seen as the work of thinking
because it involves a thorough assessment and analysis of risks associated with insurance policies,
loans, investments, or other financial transactions. It requires critical thinking skills, judgment, and
decision-making abilities to evaluate various factors and make informed conclusions.
When it comes to insurance underwriting, for example, underwriters assess the potential risks of
insuring an individual or an entity. They review applications, examine relevant documents, and
gather information about the applicant's background, health condition, financial status, and other
pertinent details. Using this information, underwriters evaluate the likelihood of claims, calculate
premiums, and determine the terms and conditions of coverage.

Underwriters must carefully consider multiple variables, such as the applicant's age, occupation,
medical history, lifestyle choices, and even external factors like industry trends or environmental
risks. They analyze statistical data, historical patterns, and actuarial models to assess the potential
risks accurately. This requires logical reasoning, problem-solving skills, and the ability to interpret
complex information.

Furthermore, underwriters also need to think about the profitability and sustainability of their
decisions. They balance the need to provide coverage and support clients with the goal of
minimizing risks for the insurance company or financial institution. This involves evaluating the
overall portfolio and considering the company's risk appetite, financial stability, and regulatory
requirements.

a)The underwriter plays a crucial role in improving long-term standing of yhe conpany by
considering various job descriptions. Here are some actions underwriter may take.

1. Risk Assessment: The underwriter will assess the risks associated with insuring properties
in the portfolio. This involves adhering to all the underwriting consideration also analysing factors
such as location, property value, construction quality, and potential hazards. By thoroughly
evaluating the risks, the underwriter can make informed decisions to minimize the likelihood of
losses and protect the company's solvency margin.

As one of the duties as an underwriter its to insure that carefully risk assessment has been donned
and determined all the possible potential hazards associated with the risk that will expose the
company to the loss.

This will ensure that we can meet the underwriting standard also requirement for re insurance
treaties, for those huge exposure whose does not meet the underwriting standard to be escalated to
avoid such loss exposure to the portfolio also avoiding Ent selection of the risk, each one should
carefully priced

2. Underwriting Guidelines: The underwriter will establish and adhere to underwriting

guidelines that ensure the company's risk appetite aligns with its financial goals. These guidelines
define the acceptable level of risk and establish the criteria for accepting or rejecting insurance
applications. By maintaining consistency in decision-making, the underwriter contributes to the
company's long-term stability.

3. Pricing and Premiums: The underwriter determines appropriate pricing and premiums for
insurance policies based on the assessed risks. This involves considering factors like the
probability of claims, expected losses, and the desired return on investment for shareholders. By
accurately pricing policies, the underwriter ensures that the company generates sufficient revenue
to meet shareholders' return expectations.

4. Portfolio Management: The underwriter is responsible for managing the property portfolio
to maintain a balanced risk profile. This involves monitoring the portfolio's composition,
diversifying risks across different properties and locations, and periodically reviewing policies to
adapt to changing market conditions. Effective portfolio management helps protect the company's
financial health and improves its long-term standing.

5. Risk Mitigation and Loss Control: The underwriter will work closely with risk
management teams to identify potential risks and implement loss control measures.in collaboration
with other department personnel to insure smooth operation and sharing of information whose will
enable to increase profit in the portfolio. As an underwriter its possible to collaborates with the
claims department to gain insights into claim patterns and trends. By sharing information and
working closely with the claims team, the underwriter gains a better understanding of the impact
of specific risks on claims experience, enabling them to make more accurate underwriting
decisions

6. Policy Analysis: An underwriter reviews a property insurance application and carefully

examines the policy terms, coverage limits, endorsements, and exclusions. They ensure that the
policy aligns with the company's underwriting guidelines and accurately reflects the insured
property's characteristics and associated risks

7. Compliance to regulatory underwriting standard: following the regulatory requirement as

stated on the act that require all the insurer to comply with especial for the class with minimum
rate, for this case as an underwriter you need to complies with to ensure that no risk pricing will
be charged bellow minimum rate published by the regulator. An underwriter ensures compliance
with regulatory requirements by thoroughly reviewing insurance applications to confirm that all
necessary documentation, disclosures, and legal obligations are met. They stay updated on changes
in regulations and guidelines to ensure adherence in underwriting practices.

This may involve recommending improvements to property safety standards, encouraging risk-
reducing behaviours among policyholders, or implementing loss prevention programs. By actively
managing risks and minimizing losses, the underwriter contributes to the company's profitability
and sustainability.

b. Key features for the risk that contribute to the prosperity of the above-described scenario
include:

1. Quality Risk Assessment: The underwriter should have the skills and expertise to
accurately assess the quality of the risks associated with the properties in the portfolio. This
includes considering factors such as property condition, maintenance history, and adherence to
safety standards. Thorough risk assessment ensures that policies are appropriately priced and helps
mitigate potential losses.

2. Effective Risk Modelling: The underwriter should utilize advanced risk modeling
techniques to quantify and evaluate risks. This involves analyzing historical data, market trends,
and other relevant factors to estimate the probability and potential severity of future losses. By
utilizing robust risk modeling, the underwriter can make more accurate underwriting decisions,
leading to improved profitability.

3. Knowledge of Regulatory Environment: The underwriter should stay informed about the
regulatory environment governing the insurance industry and property underwriting specifically.
This includes understanding applicable laws, regulations, and guidelines that impact underwriting
practices. Compliance with regulatory requirements ensures that the company operates within
legal boundaries and avoids potential penalties or reputational risks.

4. Market Insight: The underwriter should possess a strong understanding of the property
insurance market. This includes staying updated on industry trends, emerging risks, and
competitive dynamics. By monitoring market conditions, the underwriter can identify new
opportunities, adapt underwriting strategies, and effectively manage risks to support the company's
prosperity.

5. Effective Communication and Collaboration: The underwriter should possess excellent

communication and collaboration skills. This includes effectively conveying underwriting
decisions to stakeholders, such as brokers, agents, and policyholders. Additionally, collaborating
with other teams within the company, such as claims management and risk control, helps ensure a
comprehensive approach to risk management and enhances the company's overall prosperity.

CONCLUSION

In summary, underwriting is a vital function in the insurance industry, combining analytical skills,
risk assessment, and decision-making to ensure the financial success and stability of insurance
companies. It involves considering various factors, managing risks, and striking a balance between
providing coverage and minimizing potential losses.

Overall, the underwriter's ability to assess risks accurately, make informed decisions, and
effectively manage the property portfolio contributes to the long-term standing and prosperity of
the company.
References

1. Principles of Risk Assessment" by Institute and Faculty of Actuaries (IFoA).

2. Underwriting Principles and Controls" by the Insurance Institute of America (IIA)
3. Kaithar Haryana “NIILM UNIVERSITY Fundamentals of Underwriting and claim
management.(2016)
4. Tennyson, S. (Ed.). (2017). Handbook of Insurance (2nd ed.). Springer.
5. Vaughan, E. J., & Vaughan, T. (2021). Fundamentals of Risk and Insurance (12th ed.).
Wiley.
6. Insurance Journal (www.insurancejournal.com)
7. Risk & Insurance Magazine (www.riskandinsurance.com)
8. National Underwriter (www.propertycasualty360.com/national-underwriter)